Sean Ryan looks at both the pain and opportunity facing casual gaming:
On the surface, casual games are on fire. There are numerous articles in main stream publications focused on the sector, the success of the Nintendo DS and Wii are primarily due to casual games, and advertising interest is growing, and most of the top 10 in mobile games are seen to be casual, not hard-core, games. It’s now becoming common knowledge that everyone plays games, not just young men, and gaming is truly becoming an equal partner to the traditional media sectors of movies, music and television.
He sees a number of pain points:
- Rising development costs
It’s routine now for developers to tell me their game costs $250K+, and an increasing number are costing more than $500K — that compares to $50K–$100K as recent as 1–2 years ago, and that all comes out of the profit line. A comparable example is in movie sequels, where the rule of thumb is that the sequel costs twice as much and usually does less in revenue. - Slowing growth in downloadable games
After speaking with almost every developer and distributors, it’s clear that downloadable “try before you buy” revenue growth is slowing significantly as conversion rates of download-to-pay drop, and as the increasing supply of somewhat undifferentiated games lets most users enjoy a ton of gameplay if they spend just one hour on each game. - Increased distribution power
Although there has been very little actual consolidation among the top casual game distributors (Real, Big Fish, AOL, Yahoo, MSN, Wild Tangent), the increasing supply of games, often undifferentiated, means that they can squeeze developers on lower margins, lower prices, and other less favorable terms. - Decreasing game prices
Related to the over-supply of content, lower conversion rates and increasing power of distributors, it’s no secret that the effective price of a game has dropped to around $12 from the suggested $20 retail price, and that’s due to discounting, inclusion in subscription packages, and other ways to effectively discount the prices of the game to the consumer. - Flood of cheap suppliers
If the last two years were about the entry of Eastern European and Russian developers, this conference was about the rise of Indian dev shops, many promising lower prices, not just to develop third-party IP, but also to distribute their own games, which adds to the glut. Plus there is a tendency of these new entrants to “clone” popular games, which helps to undercut the category, as we have seen in time-management games or what we’ll see this year in hidden object games.
The opportunities involve Flash games.